India Microfinance

The Government of India and the World Bank last week signed a Credit Agreement of $154 million (approximately Rs 719 cr) for additional financing of the Tamil Nadu Empowerment and Poverty Reduction Project.

The Agreement was signed by the representatives from the Government of India, the Government of Tamil Nadu, and the World Bank.

Vazhndhu Kaattuvom

The objective of the Tamil Nadu Empowerment and Poverty Reduction Project – called “Vazhndhu Kaattuvom” locally, meaning “Let’s show how to live” – is to create economic opportunities and build social capital in the poorest communities. This puts poor people at the center of the planning and implementation of the changes that affect their lives. It builds on Tamil Nadu’s existing programs and good practices using what is called the Community Driven Development approach. Although Tamil Nadu has achieved significant development outcomes over the past decade, large numbers of people still live in poverty, especially in rural areas where agriculture is vulnerable to drought.

So far the Project has reached 2,500 villages covering an estimated 1.5 million people. The Government of Tamil Nadu is providing $39 million (approximately Rs 180 cr) towards the project. Assessments have demonstrated that over 87 percent of households have shown an improvement in their economic status, with mean incomes of $668 or about Rs 30,060 against the project baseline of $469 or about Rs 21,105. In addition, 53,810 young people have been trained for employment in areas such as the construction industry, service sector, telecommunications, and garment production.

“Community driven efforts are amongst the most effective ways of ensuring that the fruits of development reach the masses. This project which has already demonstrated significant results emphasizes inclusion and strengthening local organizations and village governance. The Government of India is looking forward to drawing valuable lessons from the project and to apply these lessons and best practices elsewhere – both within Tamil Nadu and in other states. This additional financing from the World Bank will help deepen the project’s development impacts,” said Venu Rajamony, Joint Secretary, Department of Economic Affairs.

Genesis of Tamil Nadu Empowerment and Poverty Reduction Project

The project started in October 2006, targeting the poorest blocks across 16 of Tamil Nadu’s districts. The additional financing will expand the project into an additional 46 new blocks of villages spread across 10 new districts, and into four new blocks in existing project districts, selected on the basis of poverty indicators.

The credit, from the International Development Association (IDA), the World Bank’s concessionary lending arm, carries a 0.75 service fee, a 10-year grace period, and a maturity of 35 years.

Tamil Nadu is the largest state borrower from the World Bank with ongoing commitments worth $2.1 billion spread over six projects. As of today, India is the largest IDA and the third largest International Bank for Reconstruction and Development (IBRD) borrower from the World Bank. The Bank’s $21.9 billion-portfolio in the country covers 77 active investment projects.